American Hotel Income Properties REIT LP Completes Acquisition of Two Embassy Suites by Hilton Hotels in Texas and Arizona for US$57.6 Million Including Issuance of Units as Partial Consideration

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American Hotel Income Properties REIT LP ("AHIP") (TSX: HOT.UN) (OTCQX: AHOTF) announced today the completion of its previously announced acquisition of two Embassy Suites by Hilton hotels (the "Acquisition Properties") located in Dallas, Texas and Tempe, Arizona for an aggregate purchase price of US$57.6 million excluding approximately US$5.7 million for brand-mandated property improvement plans (the "PIPs") and before customary closing and post-acquisition adjustments.

The Acquisition Properties comprise 529 total guest rooms and were acquired for approximately US$109,000 per guest room, exclusive of the cost of the PIPs, which is below management's estimate of replacement cost. The two hotels include the 305-room Embassy Suites by Hilton Dallas DFW Airport South hotel located in proximity to Dallas/Fort Worth International Airport and the 224-room Embassy Suites by Hilton Phoenix Tempe, which is located near Arizona State University. Consistent with AHIP's stated acquisition objectives, the Acquisition Properties are strategically located in larger population centers, near major transportation corridors and high-volume international airports, and close to a diverse group of corporate, medical, education, and sports demand generators.

AHIP funded the purchase price and the PIPs with cash on hand from its bought deal unit offerings completed in 2016, the issuance to the vendors of approximately US$17.4 million in new AHIP units (the "Units"), the assumption of an existing US$19.0 million commercial mortgage backed securities ("CMBS") loan on the Dallas property (the "Dallas Mortgage"), and a new US$13.5 million CMBS loan on the Tempe property (the "Tempe Mortgage"). The Tempe bridge loan of US$10.2 million was repaid by the Vendors at the closing of the transaction. The Dallas Mortgage is interest-only until November 2019, matures in October 2024 and has a fixed interest rate of 5.25%. The Tempe Mortgage has a 10-year term, matures in January 2027 and has a fixed interest rate of 5.14%. The Tempe Mortgage is interest only for the first three years and is then amortized over a 30-year term. The lender has also agreed to provide an FF&E reserve waiver for two years. The Units were issued at a price of Cdn$10.3099, which was based on the 10-day volume weighted average trading price of the Units on the Toronto Stock Exchange prior to the closing of the transaction. The Units are also subject to a four-month hold period.

Rob O`Neill, CEO of AHIP stated, "The acquisition of two larger, upscale select service hotels located within two of the Top 25 U.S. markets further diversifies our expanding branded portfolio." Mr. O'Neill continued, "With the application of conservative long term, fixed rate leverage, we continue to focus on providing consistent and stable returns to our unitholders."

Certain statements contained in this news release may constitute forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "plan", "expect", "may", "will", "intend", "should", and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Forward-looking statements in this news release include, without limitation, references to the following: closing and post-acquisition adjustments to the purchase price for the Acquisition Properties; the estimated costs of PIPs for the Acquisition Properties; and the management of the Acquisition Properties by AHIP's exclusive hotel manager, Tower Rock Hotels & Resorts Inc.

Forward-looking information is based on a number of key expectations and assumptions made by AHIP, including, without limitation: a reasonably stable North American economy and stock market; the continued strength of the U.S. lodging industry; the ability to successfully integrate the Acquisition Properties into AHIP's existing portfolio of branded hotels; and expectations and assumptions related to capitalization rates, fees and reserves and replacement costs for the Acquisition Properties, as applicable. Although the forward-looking information contained in this news release is based on what AHIP's management believes to be reasonable assumptions, AHIP cannot assure investors that actual results will be consistent with such information.

Forward-looking information reflects current expectations of AHIP's management regarding future events and operating performance as of the date of this news release. Such information involves significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Actual results could differ materially from those currently anticipated due to a number of factors and risks. These include, without limitation, those factors that can be found under "Risk Factors" in AHIP's Annual Information Form dated March 17, 2016 and under "Risks and Uncertainties" in AHIP's Management's Discussion and Analysis dated November 7, 2016, both of which are available on SEDAR at www.sedar.com.

The forward-looking statements contained herein represent AHIP's expectations as of the date of this news release, and are subject to change after this date. AHIP assumes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise, except as required by applicable law.

ABOUT AMERICAN HOTEL INCOME PROPERTIES REIT LP

AHIP is a limited partnership formed under the Limited Partnerships Act (Ontario) to invest in hotel real estate properties located substantially in the United States and is engaged primarily in the rail crew accommodation, transportation-oriented, and select-service lodging sectors. AHIP's long-term objectives are to: (i) generate stable and growing cash distributions from hotel properties substantially in the U.S.; (ii) enhance the value of its assets and maximize the long-term value of the hotel properties through active management; and (iii) expand its asset base and increase its AFFO per unit through an accretive acquisition program, participation in strategic development opportunities and improvements to its properties through targeted value-added capital expenditure programs.

ADDITIONAL INFORMATION

Additional information relating to AHIP, including its other public filings, is available on SEDAR at www.sedar.com and on AHIP's website at www.ahipreit.com.

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